Shaping the future of collections | The big questions answered part 2

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Here it is!

On March 17th 2022 we held our annual industry showcase, ‘Shaping the Future of Collections’ with one of the standout sessions, returning for a second instalment and appropriately named: ‘The Big Questions’. 

In this session, we invited four independent industry specialists to the stage to make up our expert panel and offer the room their exclusive insight into some of the toughest questions facing our industry right now.

Invited to the stage were:

Sheraz Afzal (SA) Group Legal, Risk and Compliance Director at the Quint Group

Angela Woolham (AW) Third Party Collections Manager at Verastar 

Tony Gundersen (TG) Head of Operations at ONMO 

Sam Challenger (SC) Head of Collections & Customer Experience at Billing Finance. 

(To find out more about our panellists please see the bottom of this article)

The session was hosted by:

Peter Gent (PG) Sales Director at COEO/CRS

The impact on Collections caused by the cost-of-living crisis.

The first question they wrestled with was, ‘what impact will the ‘cost-of-living crisis’ have on collections in the short to medium term?’

The session responses started with Sam Challenger:

SC: “Thanks, well that’s the million-dollar question right now isn’t it, I think all companies are going into ‘think tanks’ and saying well what if? 

“What if it’s just a short-term thing? What if it’s a full-blown recession? What if we go back to 1970? What if he pushes a button? 

“What if? and today I think there were some articles that came out saying that the lowest end of the market will have an increase of about 10% on their bills as opposed to the 5% that’s currently out there. 

“Fuel prices have gone through the roof; I don’t know how many travelled by car to come to this event? Did you choose a lower down car? Did you choose a petrol car? Did you go electric? Yeah, it’s all those things, I think it is just keep talking to your customers and being reasonable and I think in one of the earlier talks we spoke about we used to have 3-month payment plans. 

“Then Covid we had 6-month payment plans and actually, you’re going to have to keep on extending that and understanding what’s affordable and contact duty is going to come in and change things even further, but just making sure that you’re not pushing people below the bread line”. 

SA: “Yeah, look it’s hard to disagree with any of that, I think in reality, we’re probably looking at a number of years of increased costs, I mean the energy price stuff isn’t kind of going to go away quickly. I think we’re all focussing on utility bills going up but actually that’s going to feed into the rest of the distribution chain, so grocery prices will go up, supermarkets, transport, all overheads.

“So actually, the energy crisis is going to lead into increased utility bills and general increase in cost of living and it doesn’t take a mathematical genius to kind of figure out if incomes staying the same, hopefully and costs are going up, then whatever is kind of left in terms of free income to serve as debt payments is going to be squeezed a little bit so I think that’s almost inevitable.”

TG: “I think people have got, over the last couple of years, used to sort of different crises obviously to being a large part of the population who’ve had to live on 75% of their salary during furlough so there may be an element of resilience out there with people already.

“I think as always, the people on the margins are going to suffer the most, if you’re already in some financial distress it gets worse so whether it’s a longer term thing I don’t know but I think most companies now have spent a lot of time working out how to be a bit more proactive with customers, I think we’re a bit less reactive than we used to be so I think that in itself will help in itself. 

“As a lender what we’ve got to do is look what’s happening here and now and as you always do, adjust what you’re doing to ensure you’re taking into consideration the actual circumstances that are going on around people now and not what was going on 6 months ago, I think lenders have a bigger responsibility knowing what’s happening around their customers.”

AW: “No, I think it is really going to impact them, we are already seeing it now in our sector but I think we are more prepared for it because of Covid, like you just said we’ve been more proactive, we’ve been more sympathetic to the customers, so yeah I think it’ll definitely impact them.” 

SA: “I think the second point to make by the way and it’s not there, but the point is the conflict in Ukraine, Ukraine, I’ve heard the phrase the breadbasket of Europe, it’s a key exporter of lots of very important minerals involved in production, you’ve got supply chains that are already elongated because of Covid, 

“You know if you were trying to buy a new car right now, you’re waiting 9 months, if you want to buy a Porsche by the way they won’t even tell you when you get the delivery, but actually, in practice there is a lot of volatility out there right now, you know in terms of how it’s going to affect people’s general living circumstances.”

SC: “I think the other thing that Covid did bring on to the playing field and the crisis that’s going to continue is, you’re now getting people who are going into debt maybe for the first time, I think a lot of us who have worked in the debt collections market have always had people who have got debts or multiple debts that say it is a skill to budget and I think you are now going to go into an area where people have never needed that skill because we’ve always been in a bit of a lull of, it’s been good times really hasn’t it?

“And that’s kind of changing, you’re going to have new debtors who don’t understand about budgeting, people who don’t know how to tighten their belts. And I think that’s going to come in when engaging with these first-time customers and what we do with them and how you help them into this new unchartered territory.”

The team at COEO/CRS would like to thank all our panellists for their input in March. Stay tuned as we share more questions covered on the day from the event.

Do we see litigation growing in collections as we move to a challenging economic period? 

The UK has had a tough time over the past couple of years with the economy still in flux from the impact of the pandemic and now facing the fallout of the war in the Ukraine.

UK households face a well-publicised cost of living crisis, inflation and now a swell in energy prices as the government tries to navigate the unpredictable waters brought on by Russia’s invasion of their neighbours.

Following on from our first question ‘The impact on Collections caused by the cost-of-living crisis’, we put it to our panel of independent industry experts to offer their unique insight into litigation and whether they felt it’s a growing concern for the collections industry.

AW: “Well, yeah, I think but it depends on the business and their appetite for litigation. I know we do have an appetite for it but it’s not at all costs, we are very selective in customers that we do take through the litigation process, we make sure that if we do secure the judgements that we are able to enforce on it. At the end of the day a judgement you’re not able to enforce is just a piece of paper.

“So, yeah, I think litigation will increase but it depends on the company or business. Brand reputation is always important so it’s making sure we’re taking the right customers through the litigation process and cherry picking the right ones to go forward.”

TG: “I think from a consumer point of view. I hope not, because with the consumers we’re talking about and I think it was mentioned before, you’ve got your ‘can’t pays’ and your ‘won’t pays’, so I think you’ve still got to treat every person exactly the same. So, why all of a sudden, we would get a big increase of people who won’t pay rather than can’t pay I don’t really know. So, we should be looking at solutions well before we get to the litigation stage as long as people are engaging with us, so I would hope the answer would be not.

“Over the last couple of years as I say people have found themselves in completely different situations they would’ve expected to, through no fault of their own, the cost of living crisis doesn’t create a group of people who necessarily won’t pay you, it just changes their circumstances and shocks their system and they have to recalibrate and we have to take that into consideration as well, so I would hope the answer is no.”

SA: “I sort of look at this question with the lens of the consumer duty, where we need to act in the best interest of customers and you kind of, as the compliance guy in the room, I’ve always had kind of a bit of a challenge with litigation but actually there was this really interesting FCA enforcement decisional notice about the Yorkshire Building Society because they didn’t take enforcement action quick enough, you know they thought it was in the consumer’s best interests for the debt to linger and actually it wasn’t, the customer’s interest would’ve been better served had enforcement action been taken quicker and the debt was capped in terms of its interest.

“So, I think we need to just think through how litigation is in the consumers best interest, post-consumer duty and I think the YBS thing tells us that there is an answer to that, so I think there’s sort of two challenges in that respect.”

SC: “It’s a very interesting one, because I think that there’s a whole lot of spectrum on the people who will pay and are paying, the can’t payers no, litigation is never really the right thing for them and is to do the foreclosure and stop the housing thing getting worse or in my world getting the vehicle off them so the resulting in debt being less.

“However, economic downturns also show an increase in fraud. If you can’t earn it legitimately, you’ll earn it illegitimately, so I think that’s going to come about within conduct duty and everything else it’s going to be a big increase in people who are taking out loans, products, whatever it is with no intent to pay and in that spectrum, litigation has to be the way. You have to show a bit of a firm hand once you’ve proven the ‘won’t pay’ intent.

Will ‘collections and recoveries’ become a globalised industry?

 SA: “Short answer I think is no, I can give you a long answer Pete if you like? I think actually it’s challenging to do it on a globalised level, I mean as the bio mentioned I’ve looked after some compliance teams and collections consequently across a variety of international territories, it’s just so different, you know. So, in Finland I’ve learnt they don’t pay things by direct debit, when its instalment date you send them an invoice and they’re going to have 30 days to pay the invoice back and its weird.

“And I remember saying to people “Hey, people just pay you?”, “Yeah, they do” and that just seems really strange to us, because you kind of go, the key thing is to get it to be automated and not rely upon the consumer to take a positive action to pay you, so it’ll take a bigger brain than me Pete to figure out how to do it on a sort of one size fits all.

SC: “You kind of asked two questions when you read the question out, so the first question is up there ‘globalised industry’. Probably not, the rules are just different in every country and people’s cultures are different towards debt and paying things and in some cultures, debt is even passed on past death and things like that. But your then asked, “could we learn from each other?” 

“And I think the answer to that is yes, there are things that work in other countries that we can learn from and tweak and do differently, but would we become a globalised industry, I just think the rules and the laws, and the governing bodies are just too different to really become globalised.”

TG: “Nothing to add to that Sam thank you.

PG: “I think going back to my days when I worked at a tradist again it goes back to payment practices and stuff and in Holland all the debt recovery charges were added to the debt right away, so I was being, from a sales point of view, I was being challenged to do as well as the Dutch sales guys and I was saying “yeah, but people don’t pay for collections”. Apples with oranges here mate, its completely different.”

The team at COEO would like to thank all our panellists for their input in March. Stay tuned as we share more questions covered on the day from the event.

Is Collections fast becoming an industry with heavy reliance on IT, coders and developers?

PG: Are we fast becoming an industry with heavy reliance on IT, coders and developers?”

TG: “I think we are dealing with a lot of data, and you’ve got to be able to manage that data effectively. You’ve got to be able to mine it, see what’s there, see what behaviour is going on, so I think it is a very important element within that you are efficient, and clearly an efficient IT/digital department will support that.

“So, I think there is already a reliance on your digital capability but it’s just part of the picture, I don’t think it’s in isolation it’s part of the evolution that’s been happening in collections for some time. I think it’s definitely got a place and it’s just making sure it fits properly within your strategy and that you don’t become over reliant, and I think it’s been said a number of times before there’s a number of ways you can do things, the data and how you manage your data is just an enabler.”

SC: “We probably are fast becoming an industry, but I think if you look back 10/20 years, we had very little. Will we become totally reliant on it forever? Maybe not, I think we’ve got to get to a point where you have that good balance of, you’ve got all the options, you’ve got all the tools and you’re using your data in the right way, but we also want to be careful that we don’t force people down a sausage machine that actually doesn’t fit their journey, it’s all about giving the consumers the choices that makes it easier for them to do what they need to do.

“I was talking to a colleague earlier and I was saying, “we’ve got customers who probably don’t want to speak to us, don’t want to pay us”. If you make it easy for them, they will engage with you, if you make it difficult for them, guess what, they’re not going to engage with you. And if you get that engagement, ultimately, hopefully you get the payments. So, I think we needed some of the reliance, some of the IT codes, some of the how do you engage, what’s the best way, what sort of strategy suits ‘x’ person. But I think there’s always going to be that human element that says sausage machine will never totally work when you’re talking about people and people’s bills and what people are needing the finance for.”

AW: “Yeah I would agree with what Sam said, I think there’s a definite place for it and for those digitalised strategies but I think especially in the debt that we deal with and it can be really complicated with our customers having different services you know in different industries, I think we do still do need those highly skilled collectors, we need that interaction with them to be able to resolve that debt as we go forward.”

PG: “I think again, going back to when I first started at CRS, a lot of the collectors were almost order takers, they were just sat there taking payments over the phone, that was genuinely 50/60% of the time they were just taking payments. I think now we are seeing it they’re highly skilled, they’re negotiators, almost like a welfare team as much as anything, it has changed. It’s demanding of a higher skill set really, than it used to be.”

SA: “Yeah look I take a different view completely, actually to the rest of the panel, the FCA do this thing called occasional papers, there’s 51 of them and around about 25 of them are around behaviour and economics, how do humans make decisions and how do you influence them? 

“The key takeaway to that is that humans aren’t rational humans, the  whole edifice on which we’ve built everything, you know the human is a rational actor and you do a very methodical income and expenditure, everybody is rational, everyone would budget every month. I was 30 when I did my first budget. So actually, where I think we are getting to is this very much what the IT guy was saying around, Steve, is it Steve? I wasn’t sure. But yeah, look it’s all about testing and learning ‘A/B’, how we can nudge and influence customers to get them to want to make a decision, some customers want to interact at ‘x’ time, and some want to interact at ‘y’ time. 

“How can we learn from that and actually that isn’t a sausage machine, that isn’t around one size fits all, that’s actually providing a level of customisation, that an army of humans cannot do and for me it’s going to become much more and more around digital distribution, with sort of a sprinkling, or seasoning of these kind of trained, ninja experts who kind of just slot in when required. But I think we’ll see humans become less and less involved in collections.”

SC: “Is that by choice or because Covid and the way we’ve all moved from a cost-based perspective has forced them?

“So, I read an article on, we all say customers are choosing the digital journey and I’ll call out I’m a big believer in the digital journey, but did our customers choose that or did we force it? Because Covid happened and everyone shut down their phone lines and said self-serve guys, self-serve’s the way to go, so they had to self-serve. You know if you go into the local high streets, all the banks are shutting down and you’re going to have to use the banking app, but there is a huge tranche still of people who if you gave them the choice, they would prefer a bank, they’d prefer a face-to-face.

“So, I think the data that you get from the digital and the options that you get, absolutely 100% behind that. But I think saying all customers prefer it, I think Is more we’ve chosen it because its cost-effective for our businesses and we’ve forced people to adopt it.”

SA: “Let me frame that for you differently, let’s say that your can’t pays, and won’t pays that we use as terms, these sort of, I hate to say it, 1970’s terms, actually the world is now much more about consumers operating with biases, heuristics, we all know about confirmation bias and we all know about optimism bias, we all know the short cuts that humans take, so how do we influence people’s behaviour? So actually, maybe can’t pays and wont pays aren’t really a thing, maybe it’s someone who’s got a bias that’s going one direction and look we’ve all heard about the Downing Street nudge unit yeah so actually it’s about a customer journey potentially that is nudging the customer away from their current kind of bias or heuristic to something else.

“You don’t solve or challenge someone’s heuristic by having a debate with them like you do having a collections call, it’s that drip-feeding, nudging, so I think actually you’re talking about a digital distribution channel, but I think it’s about using that digital distribution channel that we have created to start to begin to proactively influence consumers behaviour in a way that maybe we haven’t yet fully thought through because actually we now have the tech to do it and we’ve now got some of the insights into the behavioural kind of economics behind it as well and I think that’s really exciting.”

Further information about our guests:

Sheraz Afzal (SA)  Group Legal, Risk and Compliance Director at the Quint Group

Sheraz joined the Group in 2021, and is responsible for overseeing a fast paced Legal, Risk and Compliance team, ensuring that Quint Group can efficiently monitor and identify risks to the business. Previously Sheraz held senior risk and compliance roles at Global Finance Corp, Welcome Financial Services, and the Royal Bank of Scotland Group.

Angela Woolham (AW) Third Party Collections Manager at Verastar 

Angela has been with Verastar for the past two and a half years, managing a team of twelve advisors and their DCA, enforcement and Litigation partners. Prior to employment with Verastar, Angela worked in private practice dealing with litigation; high value and complex cases and then moved into management of litigation teams.  

Tony Gundersen (TG) Head of Operations at ONMO 

Enjoying over 30 years’ experience within the Financial Services and FinTech sectors. 

Tony has previously worked at NatWest, Provident Financial Group and Ferratum Group’s UK operation. Tony now holds a crucial position with credit card start up ONMO. 

Sam Challenger (SC) Head of Collections & Customer Experience at Billing Finance. 

Sam has a proven track record that includes over 23 years of experience in international financial services. Sam has covered a broad range of sectors and products, including rent collections, mortgages, hire purchases, personal loans, funeral debt, insurance, telecoms, and credit cards.